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U.K. Unemployment Lowest in Over a Decade

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November 16, 2016

LONDON?The U.K.'s unemployment rate fell to its lowest level in over a decade in the three months to September, official data showed Wednesday, suggesting the labor market has held up well following Britain's June decision to leave the European Union.

The unemployment rate stood at 4.8% in the third quarter of the year, compared with 4.9% in the preceding three-month period, the Office for National Statistics said. The reading was stronger than expected by analysts polled by The Wall Street Journal, who predicted no change in the unemployment rate.

The employment rate remained at a joint record-high of 74.5%, the ONS said. Supported by falling unemployment, wages rose by 2.4% from a year earlier, in line with analysts' expectations.

Despite the upbeat headline readings, the data alsooffered some signals that the labor market may be starting to cool, government statisticians said.

The claimant count rose in the three months to October, increasing by 9,800, while the figure for the preceding period was raised to 5,600, significantly more than the 700 initially estimated.

Investors are paying close attention to how the U.K. labor market is faring in the wake of the Brexit referendum. Combined with a widely-anticipated upsurge in inflation, rising unemployment would likely have an adverse impact on consumer spending, a key driver of the British economy, hurting its growth prospects.

There have been limited signs of that, so far, with retail sales growing strongly in the immediate aftermath of the referendum, though this was driven in part by the weakened pound which lured overseas tourists into British shops. Retail sales data for October are due to be published later this week.

The ONS also said there were few signs that the June vote had led to an exodus of workers from other EU members. Over the year since September 2015, the number of people from the other, 27 members of the bloc working in Britain rose by 221,000.

"The referendum outcome and subsequent devaluation of sterling has had little impact so far on the number of EU workers in the U.K. labor force," said David Freeman, an ONS statistician.

Write to Wiktor Szary at Wiktor.Szary@wsj.com and Paul Hannon at paul.hannon@wsj.com